India at Risk of Becoming a Dumping Ground After US Hikes Tariffs on China

The recent intensification of the trade conflict between the United States and China has raised global economic concerns, particularly for India. The Global Trade Research Initiative (GTRI) has emphasized that India’s Directorate General of Trade Remedies (DGTR) must remain vigilant. The US administration announced on Tuesday its plan to significantly increase tariffs on various Chinese imports, including electric vehicles (EVs), batteries, and other advanced technology goods, reigniting the trade war between the two economic giants. According to GTRI, these US actions might prompt China to seek alternative markets like India for its high-tech products.

However, GTRI noted a potential advantage for India amidst these developments. Higher US tariffs on Chinese goods such as face masks, syringes and needles, medical gloves, and natural graphite could create lucrative opportunities for India. By ramping up production and exports of these items, India could potentially expand its presence in the US market. Nonetheless, India is unlikely to see export benefits in sectors like EVs and semiconductors, where it is predominantly an importer.

This situation unfolds against a broader strategy by the US and the European Union (EU) to reduce their reliance on Chinese imports. While India’s exports to China have remained stagnant at around USD 16.7 billion from FY2019 to FY2024, imports from China have surged by 44.7% from USD 70.32 billion to USD 101.75 billion. Thus, India urgently needs an effective strategy toward China.

Ajay Srivastava, Co-Founder of GTRI, highlighted that developed countries are increasingly adopting protectionist policies, with routine tariff increases and substantial subsidies aimed at boosting local production. This shift from trade policies to industrial policies underscores the need for strategic planning in navigating the complex global trade environment.

The ongoing US-China trade dispute, which began on July 6, 2018, with the US imposing a 25% tariff on USD 34 billion worth of Chinese goods, has seen multiple rounds of tariff increases. These proposed increases now exceed US commitments under World Trade Organization (WTO) agreements.

The trade imbalance between the US and China has become significant, with the US importing goods worth USD 427 billion from China in 2023 while exporting only USD 148 billion to China. In this context, the DGTR, as part of India’s commerce ministry, plays a crucial role in addressing such challenges through anti-dumping duties, safeguard duties, and countervailing duties under WTO agreements.

As global trade dynamics continue to shift amid these tensions, it is crucial for countries like India to remain vigilant and adapt their trade policies and strategies accordingly.